Monday, September 30, 2013

How Much Do YOU Pay in Taxes?

How much do you pay per year for the privilege of "being governed"? 

Unfortunately its a lot more than you think. Most citizens except those who have clawed their way to the elite political class do not receive a commensurate value in government services for what they pay in taxes. 

The main reason for this is that the political system essentially bestows inherent power upon politicians to disburse tax revenues at their discretion with no real oversight; therefore resources go to the highest bidders or the politically connected. In addition, care or concern for value in spending tax payer dollars is thrown out the window as bureaucrats spend other people's money that they are not personally responsible for. 

Although tax payers typically consider the Pay As You Earn (PAYE) income tax as the primary way taxes are extracted they often neglect to quantify where substantial chunks of their income is syphoned off via the Value Added Tax (VAT), Import Duty and government created inflation due to the expansion of the money supply.
For instance a tax payer who earns a gross monthly salary of $16,000 pays yearly income tax of $33,000 and a further $2,189 in health surcharges for a total of approx $35,000. Assuming the tax payer spends 50% of their income on consumer items that attract VAT they will spend a further $11,748. A total of approx $47,000 per year in taxes. The fun doesn't end there.

The primary reason prices are steadily inflating is because the government by way of the Central Bank has constantly increased the money supply to fund government spending. This serves to inflate all prices including food and other consumer prices. For example in 2012 the net money supply was increased 12.5% primarily through new "demand deposits" which increased by 18%. 

Demand deposit are funds made available by the state held in an account from which funds can be withdrawn at any time to facilitate payments and transfers. By increasing the money supply the purchasing power of TT dollars was consequently devalued by the equivalent 12.5%. 
Therefore for the unsuspecting tax payer earning $16,000 / month assuming only a modest 10% inflation rate would be deprived a further $15,678 / year of purchasing power due to inflation. Cumulatively the tax payer is relieved of at least $62,625 per year or 33% of their total gross income via overt or covert government confiscation. 

In other words for the tax payer: 4 out of 12 months work per year is dedicated to paying government tribute. Imagine for a two income household that's an aggregate amount of $125,250 of confiscated wealth! This figure will be even more if you purchase items such as alcohol, tobacco; or electronics for example which attract 25% import duty in addition to 15% VAT. 

The level of apathy among tax payers with regard to wanton wastage and corruption related to government spending encourages the rampant misbehaviour. Once the population becomes more conscious and internalizes the massive tax burden yoked around their necks perhaps they will wake up and resist the assault on their earned income.

3 comments:

  1. Currently trying to build a house, the material cost alone is around $500,000 this means that I paid approximately $75,000 in VAT. Not to mention the additional duty that was tacked-on on imported material like steel and home fixtures. Will also pay interest via my mortgage on the taxes I pay to the financier. A double whammy jeez and ages!.....

    ReplyDelete
  2. This comment has been removed by the author.

    ReplyDelete
  3. Income Tax is that the tax that you just pay on your financial gain. tax is paid by wage earners i.e., salaried category, freelance and non-incorporated companies. tax is one in every of the vital sources through that a government finances its activities. the non-public tax revenue is just one.1% of gross domestic product in Islamic Republic of Pakistan (11% of total tax revenues) and solely a pair of of operating age population is registered as payer. jasa konsultan pajak

    ReplyDelete

You can easily comment anonymously if you'd like.